Bomb from Brussels: Cyprus Model May Guide Future Bank Bailouts

SPIEGEL ONLINE INTERNATIONAL: Should the Cypriot bailout become a model for the future? The mere suggestion sent markets tumbling last week. But increasing numbers of European politicians would like to see bank shareholders and investors bear a greater share of crisis risk. The EU may be changing its strategy. By SPIEGEL Staff

Jeroen Dijsselbloem's original game plan was to just keep a low profile. When the 47-year-old Dutch finance minister became head of the Euro Group three months ago, the first thing he did was deactivate his Twitter account. In meetings of the finance ministers of the 17 euro-zone states, he let his counterparts do most of the talking. And whenever he appeared before reporters in Brussels afterwards, he would start with sentences like: "Maybe it's good, if I say something."

Dijsselbloem seemed determined to become the most boring of all the boring bureaucrats in Brussels -- until last Monday, that is, when he did something no one would have anticipated: He detonated a bomb. The way that large depositors and creditors were being drawn into the bailout of Cypriot banks, he said, could become a model for the entire euro zone. In future aid packages, he said, one must look into whether bank shareholders, bond holders and large depositors could participate so as to spare taxpayers from having to foot the bill. He was announcing nothing less than a 180 degree about face.

Cyprus as a model? Dijsselbloem had hardly finished his comments before international news agencies began registering its impacts. Markets around the world nosedived, the euro sank to a four-month low and EU leaders had to rush into damage-control mode, as did the man who triggered the storm himself. Dijsselbloem backtracked by saying that Cypriot banks were obviously "a special case." Germany's top-selling daily tabloid, Bild, scoffed that Dijsselbloem would get a new nickname in Brussels: "Dusselbloem," the rough equivalent of "Dimwit-bloem."

But the ridicule might prove premature. In reality, Dijsselbloem merely expressed something that many Europeans already think. Whether at the European Parliament or in several Continental capitals, many are saying that the time is ripe for the financial sector to assume a greater share of the costs for rescuing ailing banks. » | Martin Hesse, Michael Sauga, Cornelia Schmergal and Christoph Schult | Translate from the German by Josh Ward | Monday, April 01, 2013

Euro Crisis: After the Cyprus Bank Raid Fiasco, Germany Is Being Painted as the EU’s Chief Villain
THE DAILY TELEGRAPH: It’s easy to see why German taxpayers have had enough, argues Mats Persson. But the Cyprus bailout has ended with their government being painted as the EU’s chief villain - an accolade that should belong to the architects of the euro.


In the running blame-game that is the eurozone crisis, Germany has now emerged as the chief villain. In many parts of Europe, the country has been outright blamed for the Cypriot crisis, which saw Berlin demand that Cypriot depositors be taxed in return for a €10bn bailout.

A commentator in Spanish daily El País went the furthest. “Like Hitler,” he wrote, “German Chancellor Angela Merkel has declared war on the rest of Europe.”

The piece was quickly withdrawn but the damage had been done. In Britain, commentators across the political spectrum have lined up to criticise Germany. The New Statesman recently labelled Merkel “the biggest threat to global order and prosperity” - ahead of notorious dictators such as Iran’s Mahmoud Ahmadinejad and North Korea’s Kim Jong-un.

Most comments have been far more level-headed but anti-Germany sentiments have reached levels not seen in a long time. Within Germany itself, however, the decision to tax Cypriot depositors continue to enjoy wide-ranging support, as does the wider austerity-driven approach to the crisis.

What’s more, many Germans would echo the country’s justice minister, Sabine Leutheusser-Schnarrenberger, who called on the EU to “also display solidarity with us and defend the Germans against unjust accusations”. » | Mats Persson *, director of Open Europe | Saturday, March 30, 2013

Mats Persson is the director of Open Europe, an independent think tank that campaigns for EU reform.

Cyprus Banks Reopen Amid Simmering Tension
THE DAILY TELEGRAPH – EXTRACT: Cypriots formed orderly queues outside the country’s banks after they reopened for the first time in nearly two weeks on Thursday, confounding fears that there would be scenes of unrest and violence.

…

Angela Merkel, the German Chancellor, was the target of particular resentment.

“Merkel says every single Cypriot is guilty of dirty banking. But it is the Germans who should be ashamed for the greatest evil in the history of Europe – the Holocaust,” said a furious Cleri Machlouzarides, a chartered architect, outside a branch of Laiki Bank.

“Tell the bloody Nazis to go home. Germany should go and find someone their own size to pick on instead of trying to strangle us. Europeans should know it’s not going to stop here. “Luxembourg is next, then Spain, Portugal, Ireland.” … » | Nick Squires, in Nicosia | Thursday, March 28, 2013

One of the Nastiest and Most Immoral Political Acts in Modern Times
MAIL ONLINE: People who rob old ladies in the street, or hold up security vans, are branded as thieves. Yet when Germany presides over a heist of billions of pounds from private savers’ Cyprus bank accounts, to ‘save the euro’ for the hundredth time, this is claimed as high statesmanship.

It is nothing of the sort. The deal to secure a €10 billion German bailout of the bankrupt Mediterranean island is one of the nastiest and most immoral political acts of modern times.

It has struck fear into the hearts of hundreds of millions of European citizens, because it establishes a dire precedent.

If democratically elected governments are willing to impose outright confiscation of up to 40 per cent of balances over €100,000 upon depositors in Cyprus, then why not another such hit tomorrow — in Spain, Italy or, most plausibly, Greece?

This is the most brutal display since 2008 of how far the euro-committed nations are willing to go to save the tottering single currency. It shows that the zone’s crisis will run and run, to the grievous disadvantage of almost everyone except the Germans. » | Max Hastings | Tuesday, March 26, 2013

Public Can't Be Bluffed
HERALD SUN: THE Cyprus fiasco teaches a terrific - but often forgotten - lesson to every social planner of the Left.

That fiasco is the astonishing decision to steal up to 10 per cent from every bank deposit in Cyprus to help fund a bailout of that country's banks.

This overnight theft was a condition demanded by the new masters of Europe, the European Union and International Monetary Fund, to raise $8 billion towards its $12.5 billion bailout of Cyprus.

But Cypriots reacted with such fury that not one Cypriot MP dared back the plan and even the Cypriot President, who reluctantly struck the deal last week, dropped it "because (the people) think it is unjust".

The banks remained closed for days to stop a bank run by people who rightly realised their accounts were now overseen by thieves and the panic threatened to spread to other debt-crushed European countries.

Even in Australia, our markets plunged $30 billion for fear of what might happen next. As former Cyprus central bank governor Athanasios Orphanides rightly said: "To confiscate deposits is essentially sending a message that no one with deposits ... in a weak country, like Spain, should feel safe ..."

So here are the lessons for the Left. » | Andrew Bolt | Herald Sun | Wednesday, March 20, 2013

Cyprus Turns to Russia after Parliament Rejects Levy on Bank Savings
THE DAILY TELEGRAPH: Cyprus turned to Russia for help on Tuesday night after the country's parliament overwhelmingly rejected a tax on the deposits of bank savers.


With protesters celebrating in the streets, the rejection of a draconian levy left a planned £8.5 billion eurozone bail-out to save the Mediterranean island in chaos.

The country's finance minister defied explicit warnings from Angela Merkel, the German chancellor, and left Cyprus for urgent talks in Russia.

Michael Sarris flew to Moscow to plead for aid, despite Mrs Merkel warning Cyprus not to enter into negotiations with Russia, raising the spectre of eurozone disintegration.

"The chancellor once again emphasised that the negotiations are to be conducted only with the troika (the European Union, European Central Bank and the International Monetary Fund)," said her spokesman.

Not a single Cypriot MP voted in favour of a eurozone rescue package that had been made conditional by Germany on the Cypriot government finding £5 billion to pay off its debts by raiding bank deposits, including the savings of up to 60,000 Britons.

Under the original eurozone deal at the weekend, Cyprus agreed to impose a levy of 6.75 per cent on bank accounts up to €100,000 (£85,000) and 9.9 per cent for larger deposits.

Despite a compromise proposal not to tax any bank deposit less than €20,000 (£17,000), the country's 36 MPs rejected a deposit tax that has rattled financial markets and threatened the island's future as an offshore banking haven for Russian investors, with 19 MPs abstaining from the vote.

"There can only be one answer: no to blackmail," Yiannakis Omirou, the speaker of the Cypriot parliament said. » | Bruno Waterfield, Brussels, Richard Spencer in Nicosia and Robert Tait in Limassol | Tuesday, March 19, 2013

Darling: Cyprus Savings Raid Could Trigger Bank Runs Across Europe
THE DAILY TELEGRAPH: Bank runs and financial panic could spread across Europe after Cyprus proposed raiding people's savings for a new bail-out, Alistair Darling has said.

The former Chancellor said Cyprus is doing "everything you should not do" after the tiny country decided to seize around 6.75 per cent from smaller deposits and almost 10 per cent from larger ones.

The country is currently deciding whether to make richer savers pay a bigger proportion of the bill but Mr Darling said the whole idea of taking money from ordinary savers is dangerous.

He said EU should not be letting Cyprus "blow apart" the principle of protecting deposits under €100,000, as people will start pulling their cash out of banks if they fear this elsewhere.

"It seems to me to make it more likely that if you’re a saver in Spain or Italy, if you have a sniff of the EU or the IMF coming your way you’ll take your money out and you’ll get a run on the bank," he told BBC Radio Four's Today programme.

"So what they’re doing is everything you should not do when you’re trying to solve a problem like this." » | Rowena Mason, Political Correspondent | Tuesday, March 19, 2013

Russians Prepare to Withdraw from Cyprus

Expats in Cyprus Furious at 'Legalised Theft' of Their Savings
Britons living in Cyprus are outraged by the Cypriot government's plans to impose a levy on bank deposits, with many desperately trying to withdraw their savings before tax is enforced.